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SMM Daily Review - 2010/6/29 Base Metals Market
Jun 30,2010 10:17CST
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SHANGHAI, June 30 (SMM) --
China A-shares markets on Tuesday closed at 2,425 points, hitting a new low since April 30, 2009, down as much as 108 points or 4.27%, sending commodity market lower. On Tuesday, SHFE October delivery copper contract became the most active contract on the SHFE copper market. SHFE copper for October delivery opened slightly lower, and fluctuated narrowly in the morning session, briefly touching RMB 53,940/mt. After 10:30 am, SHFE October delivery copper prices slid due to falling China's A-shares market, and tracked downward further in the afternoon session, dropping as low as RMB 52,580/mt before ending at RMB 52,790/mt, down RMB 1,350/mt or 2.49%. Positions for SHFE October delivery copper contract were up 24,778 lots, with total positions at 155,000 lots, and trading volumes expanded to above 440,000 lots, and with trading value exceeding RMB 117.5 billion. The turnover rate was 284%. The shorts entered the market again. SHFE copper market ended in negative territory on Tuesday, reversing previous price gains. SMM believes SHFE October delivery copper prices will likely test support at RMB 52,500/mt again. SHFE current-month copper prices closed at RMB 53,080/mt on Tuesday, down RMB 1,190/mt, and may lose support at RMB 53,000/mt on Wednesday.

In the spot market, market sentiment was hit by plunging copper prices on the SHFE market. Supply of imported goods remained limited, as the SHFE/LME copper price ratio fell below 7.95. But, some imported hydro-copper or low-end copper were quoted for sales, with premiums only at positive RMB 50~80/mt, and holders of those goods were eager to sell off products as prices were on a downward track. Domestic copper were unable to hold prices firm amid such a sluggish market sentiment, with premiums between positive RMB 80-150/mt. At the end of month, suppliers of goods were eager to sell goods for cash generation, while downstream producers generally stood on the sidelines along with cash flow and depressed sentiment from weakening prices. The number of players with pessimistic towards short-term outlook has increased following strong shorts. SMM predicts spot copper prices will return to fluctuate in a lower price band of RMB 52,500-53,000/mt. After entering July, SMM believes copper prices will regain upward momentum after price consolidation. In the morning business, transactions were made in the RMB 53,800-54,100/mt, and traded prices slid to RMB 53,200-53,400/mt in the afternoon trade. Premiums remained between positive RMB 50-150/mt. Wednesday is the last trading day for June, and trading sentiment is expected to remain low. 

SHFE 1009 aluminum contract prices soared to a daily high of RMB 15,050/mt after opening at RMB 14,915/mt in the morning session, but later edged lower all the way following stock market trends during spot trading hours in east China, and slumped at noon, with prices falling to as low as RMB 14,735/mt. SHFE 1009 aluminum contract prices finally closed at RMB 14,780/mt, with prices standing above the 10-day moving average, down RMB 170/mt compared with the previous trading day, or down 1.14%. Positions increased by 5,498 lots to 254,792 lots, while trading volumes increased slightly to 156,850 lots.

Spot market was extremely sluggish, and tumbling aluminum prices heavily dampened downstream buying interest. Meanwhile, downstream fabricators generally only made limited purchases by month-end, and actual traded prices slipped along with falling SHFE aluminum prices, with trading sentiment lackluster. Aluminum prices ended recent upward trends after experiencing significant declines yesterday, but steady declines in LME aluminum inventories and relatively high crude oil prices will help limit any drops in aluminum prices, and aluminum prices are expected to fluctuate in a narrow band. 

SMM kept lead price offers unchanged for third consecutive trading days, while trading sentiment in domestic lead market saw no improvement. Discounts expanded further from yesterday's slight discounts. Slumping stock markets dampened base metal market sentiment. Prices for Shuangyan, Jinsha brands were quoted at around RMB 14,750/mt, and offers for well-known branded products fell after goods from Gejiu were offered lower between RMB 14,600-14,650/mt. The number of players with pessimistic outlook increased, while downstream producers were not eager to purchase at the end of month in view of cash flow. If LME lead prices continue to drop, domestic lead prices will weaken further in the coming day.

SHFE zinc prices moved narrowly in the morning session after opening low, and later slumped following plunging domestic A-shares market, and then edged lower in the afternoon, with prices mainly fluctuating at low levels. SHFE 1010 zinc contract prices opened at RMB 15,300/mt, but dipped to RMB 14,720/mt in the afternoon, and finally closed at RMB 14,825/mt, down RMB 610/mt, or down 3.95%. Positions of SHFE 1010 zinc contract increased by 18,642 lots to 236,900 lots, and trading volumes reached 1.977 million lots, with trading value near RMB 149 billion. The turnover rate was 834.57%. Short position momentum was gaining, and SHFE zinc prices have fallen to break through many short-term moving averages, with prices expected to test the RMB 14,500/mt support level on June 30th.

In the spot market, tumbling SHFE zinc prices depressed spot market sentiment. In addition, downstream consumers were unwilling to make purchases due to cash flow problems by month-end, but cargo-holders were moving goods actively when zinc prices moved on a downward track in order to generate cash. In this context, market supplies were ample, with growing offers and falling inquiries, and overall trading sentiment was sluggish. #0 zinc prices fell rapidly from RMB 15,000/mt to RMB 14,900/mt in the morning, and even fall to between RMB 14,650-14,700/mt in the afternoon. Spot zinc prices will unlikely stand firm at RMB 14,500/mt on June 30th.  

LME tin prices opened at USD 18,123/mt and closed at USD 18,180/mt on June 28th, down USD 20/mt from a day earlier, with the highest price at USD 18,240/mt and the lowest price at USD 18,100/mt. Daily trading volumes were 127 lots and positions were 17,718 lots. Although European equity markets closed with gains on June 28th, the economic data from the US were mixed. In addition, the G20 summit signalized a cautious optimistic prospect of the global economy at the weekend, investor's risk aversion sentiment growing strong and causing slight decline of LME tin prices. On June 29th, LME tin prices opened at USD 18,239/mt and the then slipped to USD 18,000/mt due to slump of China's equity markets. Closed attention should be paid to June consumer confidence index scheduled to release on June 29th.

In the Shanghai tin spot market, smelters kept offers firm, and lower-priced goods from traders were better received by purchasers. Affected by sluggish transactions, offers from traders were lowered from a day earlier. Traded prices of Yunxi brand tin from Yunan Tin group and Yunshan brand tin from Yunnan Gejiu Zili Metallurgy Co were between RMB 139,700-140,500/mt and traded pries of Tianti tin from Yunnan Gejiu Zili Metallurgy Co were between RMB 141,000-141,500/mt. Traded prices of some unknown brand tin were between RMB 138,500-139,000/mt. Although arrivals of tin to Shanghai tin market was extremely limited due to inconvenient transportation caused by heavy rain tin south China and trading inventories of tin have been consumed for several days, supply was still not tight due to sluggish consumption.

LME nickel prices opened at USD 20,000/mt and closed at USD 20,417/mt on June 28th, up USD 395mt from a day earlier, with the highest price at USD 20,600/mt and the lowest price at USD 19,820/mt. Daily trading volumes were 1,876 lots and positions were 87,520 lots. On June 29th, LME nickel prices opened at USD 20,300/mt, reaching the highest level at USD 20,350/mt and touching the lowest level at USD 19,932/mt, with the latest at USD 19,950/mt reported, down USD 467/mt from a day earlier. The US dollar advanced slightly, and China's A share market hit a 14-month low, causing decline of LME nickel prices.

In the Shanghai nickel spot market, transactions were slightly brisk. Traded prices of nickel from Jinchuan Group were between RMB 156,500-157,000/mt and traded prices of imported nickel were between RMB 155,500-156,000/mt. Offers later slipped along with decline of LME nickel prices in the afternoon session, with imported nickel at RMB 155,000/mt and nickel from Jinchuan Group at RMB 156,000/mt, but transactions were slightly sluggish. Supply of goods was relatively ample in the market. Sichuan Southwest Stainless Steel Co., Ltd, monthly capacity of 50kt, will conduct equipment installation and debugging as well as unit maintenance from July 1 to July 26 and production will be totally suspended during that period.

To contact the writer on this report: angelawang@smm.cn


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